Sales Plan

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MARKET RESEARCH 3

3.3
THE SALES PLAN
. Prices And The Market . Pricing Strategies . Marketing Segmentation And The Marketing Mix . The Marketing Process . Sales And Finance In Marketing . The Sales Plan Exercise - Calculating Financial Impact Of Sales

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THE SALES PLAN 3.3

PRICES AND THE MARKET
There are a number of different approaches to pricing. Most businesses use a mix of these approaches or use a different approach to different customers and at different times.

How Your Product Or Service Compares
The price of your products and services will, to a certain extent, depend on the competition. Make comparisons based on the following where appropriate: . How your product performs . How it looks . What is its quality? . How is it packaged and presented? . Whether your level of service is better or worse than your competitors . Your image Do not be afraid of setting a higher price than your competitors if your product or service has advantages over theirs. Customers often associate higher prices with higher quality - therefore it may be that a higher price can help the image or reputation of your products and services.

Pricing Strategies For New Products
If you are offering a new product there are two approaches you could adopt: . Price Skimming - opts for a high price initially to take advantage of demand for a new product . Penetration Pricing - attempts to gain a large share of the market for your product before the competition appears on the scene, by setting a fairly low price to dominate the market

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THE SALES PLAN 3.3

What The Market Will Bear
Some argue that the price should be set by what the market would bear, but there are no easy methods for calculating this. If your prices were high would your customer choose another supplier? If you dropped your prices would you gain new customers? Generally if your products are bought infrequently they are more likely to be less sensitive to price change. Alternatively, if your products are bought on a regular basis your customers are more likely to be price sensitive, as they know the price they should pay. You will have to establish a price by looking at the market you are in and your particular product in relation to competitors.

Cost-Plus Pricing
Many businesses use the total of their overheads and drawings to fix a price. Although this may seem a straightforward option it has its drawbacks. For example, if your costs are very low, should your prices automatically be low? It is more realistic to think in terms of price ranges. The lowest price will be fixed by the cost plus contributions to overheads, the break even point. You should not go below this price.

Pricing For Profit
There are five ways to increase profits: . Cut your costs . Sell more . Change your product mix . Increase your prices . Combine elements of all these You will aim to set your prices at a level which will provide you with the highest profits possible.

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THE SALES PLAN 3.3

PRICING STRATEGIES
The price you charge your customers usually (but not always) has to cover the costs of making a product or providing a service. As important is the idea that pricing strategies can change people's behaviour. For instance, very low prices could persuade them to buy more. The different kinds of strategy are: Cost Plus - the basic cost of each item to make/provide, plus your profit margin. Mark-up - traditional to add a simple percentage to your cost price, especially in retailing. Basic Plus - charge a basic price for the product but add on ’extras’ like delivery, servicing etc which may have a different price depending on the customer. Uniform - the same price for all customers no matter who they are or how much they buy. Differential - offering a different price to different customers depending on what they expect to pay or get for their money, or their eagerness to buy. Access - offer a low price to get customers, knowing that you can put the price...
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